Live blog and video of Fed talk with Fisher, Williams and Bernanke

May 19, 2014, 11:52 AM ET

Richard Fisher, left, and John Williams

Dallas Fed President Richard Fisher, San Francisco Fed President John Williams, and former Federal Reserve Chairman Ben Bernanke in a discussion presented by the George W. Bush Institute — and the 43rd president appeared as well. MarketWatch’s Steve Goldstein and Jeffry Bartash live-blogged the proceedings.Also read:Fed’s rate-change system up for revamp

There was an interesting piece from The Wall Street Journal’s Jon Hilsenrath over the weekend, on how an important issue will be how the Fed will lift interest rates. It’s pretty technical but worth a scan.

Fisher, with nods from Williams, gets in another round of Congress bashing over fiscal policy. “Congress is the choke point right now,” Fisher says. Says Fed has pedal on gas while Congress has it on brake.

Discussion now on regional economy. Williams pointing out areas out West were hit hard by housing crisis, but now it’s turning up. In San Francisco and Seattle, economy “is booming beyond belief” — driven by technology and new ideas.

Bartiromo notes Pfizer tried to buy AstraZeneca to get a better tax rate. “We have competition for capital — this is exactly what we fought for,” Fisher says, noting the fight to win the Cold War. Fisher says monetary policy around world fairly similar, the difference is fiscal incentives.

Williams says Fed needs to study whether there are excesses in certain markets, eg leveraged loans, from current low interest rates. There are trade-offs to having extraordinary accommodation globally. But he doesn’t sound too concerned.

On why they’re not doing more, Williams says it’s a matter of trade-offs.

Fisher says, on idea that Rep. Kevin Brady has to have commission on whether Fed should have dual mandate of stable inflation and full employment, that such a commission would need members outside Congress.

Williams says dual mandate isn’t really an issue — and countries that only have single mandate “pretend” and really do look at employment.

Fisher says you would have thought that during taper, the yield on the 10-year would be over 3%.

Williams says stock market doesn’t look overvalued. But says there is a question in the bond market on what interest rates will be for the long term. In the end, question is about investment over savings.

“I sort of have a problem with the designation,” Fisher says. He jokes it’s sounds like something you pick up at a bar.

Neither Fisher nor Williams want to get into SIFI designation of asset managers (the Fed does have a seat at the FSOC table but regional Fed presidents like Fisher and Williams aren’t part of it.) But Williams says one of lessons of crisis is that we have interconnected system, so firms that aren’t directly regulated “can create explosive danger.” FSOC is way to regulate those shadow institutions.

Bush introducing the conversation between his former chief of staff, Josh Bolten, and Ben Bernanke.

“I came to trust Bernanke,” Bush says, noting the Fed chairman’s time as an economics adviser. In the Roosevelt Room, Bernanke said, “you better do something or we could be headed for a Great Depression.”

Bush says, first thing you have to decide is whether to listen to someone making that warning. Says Bernanke and former Treasury Secretary Henry Paulson worked well under fire.

Bush revealed he didn’t know what TED spread was. Context was a discussion when someone told the president about the spike in the rate, which is the difference between the interest rates on interbank loans and on short-term U.S. government debt.

Former Fed Chairman Ben Bernanke, at Bush Institute, says the central bank “desperately tried to save” Lehman Brothers and AIG to stave off financial crisis in the fall of 2008. “I had some very, very black moments,” he said.

Bernanke says he knew President Bush was deeply uncomfortable with bailing out banks but the “president played it just right” and honored the Fed’s independence. “He agreed to support us and it was critical.”

Bernanke says what was missing in the Fed’s thinking before the financial crisis was the severity of the threat posed by a housing crash. Wall Street bigwigs told the Fed before the crisis that a decline in house prices wouldn’t hurt U.S. banks too much.

“If he takes the weekend off and allows events to unfold, it will show that Fannie and Freddie were indeed unique and that the government has not lost its nerve. Inaction speaks louder than words,” the article concludes.

Bernanke says a sign that QE, or quantitative easing, worked was the recovery in the stock market. He noted that the day the Fed announced the first QE program in 2009 was the same day the U.S. stock market hit “rock bottom.” A bull market took hold soon afterward.